Oil set for weekly gain as vaccine optimism outweighs lockdowns
OIL is poised for a third weekly gain in New York as positive Covid- 19 vaccine developments outweighed concerns about stricter restrictions due to a surge in global infections that will dampen fuel demand.
Futures are back near $ 42 a barrel and are set for the longest run of weekly gains since August following news of another vaccine breakthrough on Monday, while further analysis showed Pfizer Inc.’s shot was more effective than initially flagged. Vaccine optimism offset a grim picture emerging across the US with Americans urged not to travel for Thanksgiving, California ordering a one- month curfew and New York closing public schools as virus cases surged.
Shrinking timespreads, meanwhile, are signaling concerns about over- supply are easing. The threemonth time spread for Brent crude in London was 46 cents a barrel in contango, the narrowest since July.
Still, the oil market is facing an uncertain demand recovery, with a resurgent virus in the US and Europe prompting tighter restrictions and keeping consumption and prices in check, even as parts of Asia rebounds strongly. The flaring outbreak will be a key issue for Opec+ when it meets at the end of the month to decide on whether to delay a planned easing of cuts early next year.
“The vaccine news supports our view that world oil demand will move higher over the course of 2021,” said Victor Shum, vice president of energy consulting at IHS Markit. “There is promise of a better time, but the immediate future is grim. There is an alarming rate of new Covid- 19 cases in North America and Europe.”
Lockdowns aside, other setbacks including health experts finding no evidence that a widely used drug improved survival of Covid- 19 patients and a dispute over stimulus from the Federal Reserve also contributed to bearish sentiment.
Ahead of the Opec+ meeting, which could see a possible extension of output cuts by threeto- six months, a buying spree by Asian refiners is complicating the outlook amid surging production from countries such as Libya. The African nation is now pumping 1.25 million barrels a day, with France’s Total SE in talks to increase energy investment in the country.
The United Arab Emirates, meanwhile, tried to ease a spat with its Opec+ partners on Thursday, after officials privately questioned the benefit of its membership of the group. The UAE “has always been a committed member,” Energy Minister Suhail Al- Mazrouei said.